Bank of America's Moynihan, known for fixing and cutting, must now build

(Reuters) - Brian Moynihan is known inside Bank of America Corp BAC.N as a problem-fixer and a cost-cutter, and in his three years as the bank's chief executive, he has had that reputation tested like never before.

Now, proof of his abilities is beginning to show. On Thursday, the bank said its mortgage lending volume was growing and expenses were falling in the unit that handles problem home loans. Both are early signs that the second-largest U.S. bank is finally moving past its disastrous 2008 purchase of subprime lender Countrywide Financial.

But the bank's fourth-quarter results also underscored the enormity of the obstacles that Moynihan still faces. Total revenue dropped 25 percent on a further decline in consumer banking and the impact of various charges. Even if the bank is moving past its worst home loan troubles, it still needs to figure out how to grow.

Boosting profit now is tricky for any bank CEO, because lending margins are thin and regulations and capital rules are squeezing income from many banking businesses.

Analysts, investors and some in the industry are beginning to wonder if Moynihan is up to the task. Two executives who have worked with Moynihan said he has little experience growing revenues in the units he has fixed over the years. They did not want to be named because they were not authorized to speak on the record.

"Is he the long-term, strategic guy? Probably not," said Edward Jones analyst Shannon Stemm. "Relative to other banks, it comes back to, 'What is the earnings potential of Bank of America and where will that growth come from?'"

Moynihan is trying. On a conference call with analysts, Moynihan and Chief Financial Officer Bruce Thompson laid out some of their efforts to gain new business, including hiring mortgage loan officers, small-business bankers and investment advisers in branches. Total loans were up 2 percent from the third quarter at $907.8 billion but down 2 percent from the 2011 fourth quarter.

Although revenue in the fourth quarter fell in consumer banking from the same quarter a year earlier, it increased in the global banking, markets and wealth management businesses. In 2011, Bank of America also launched a broad cost-cutting program to eliminate $8 billion in annual expenses by mid-2015, and expenses fell further in the latest quarter.
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